Value context and insight. lkm@koreatimes.co.kr
China lockdown poses risks to Nongshim, AmorePacific
Tesla's China-made Model 3 vehicles are seen during a delivery event at the carmaker's factory in Shanghai, China. Yonhap
By Lee Kyung-min
By Lee Kyung-min
The recent COVID-19 lockdown in Shanghai has emerged as a possible risk to the distribution networks of Korean firms that operate manufacturing plants in the world's second-largest economy, according to industry watchers Tuesday.
Nongshim, a food company, and AmorePacific, a cosmetics firm, said they are closely monitoring developments in the city, although their operations have not been as heavily affected as those of Tesla. The U.S. electric vehicle maker's Shanghai factory has remained shut for eight days, Monday, following a two-stage lockdown that started near the Huangpu River. The prolonged shutdown of factories in Shanghai may pose a major threat to partner firms and their employees, leading to the closures of businesses and job losses.
“We are closely monitoring the situation,” an AmorePacific spokesperson said.
The citywide lockdown has led to a temporary shutdown of AmorePacific's manufacturing facilities, but has yet to cause a significant disruption in its manufacturing, logistics and distribution processes. The firm is preparing for possible complications in sales over the long term.
“We do not believe the lockdown and movement restrictions will continue for much longer than previously expected. Monitoring developments and complying with authorities' health guidelines are all we can do at this point,” he said.
Similarly, Nongshim is paying close attention to the health authorities' directives on containment measures.
“Our facilities in China remain shut for about a week, but operations will resume as soon as the restriction is lifted,” a Nongshim spokesperson said.
The sudden shock to many exporters and local firms that depend on China for parts will be mitigated in part by emergency assistance provided by the Korea Trade-Investment Promotion Agency (KOTRA).
The state-run organization said that small- and medium-sized export firms that can no longer use storage and packaging facilities in China's major cities, including Shanghai, will be granted access to KOTRA's local logistics network until Nov. 30.
Up to 70 percent of the costs needed to use alternative transport services will be paid by KOTRA. Each company will be limited to 10 million won ($8,250).
The Shanghai lockdown is the latest in China's “zero-COVID” strategy, which involves using tight lockdowns, immediate mass testing and extensive quarantines to control the spread of the coronavirus.
In mid-March, residents of Shandong and Jilin were placed under quarantine after the number of new daily infections reached record highs.